People in a certain group have a 40% chance of dying this year. If a person in t

Question

People in a certain group have a 40% chance of dying this year. If a person in this group buys a life insurance policy for $4500

that pays $1,000,000 to her family if she dies this year and $0 otherwise, what is the expected value of the policy?

(enter

a minus sign if necessary and round your answer to the nearest

dollar).

Score: 0 of 1 pt 3 of 15 (12 complete) HW Score: 58.33%, 8.75 of 15 pts Concept Question 1.1 Question Help * People in a certain group have a 0.40% chance of dying this year. If a person in this group buys a life insurance policy for $4500 that pays $1,000,000 to her family if she dies this year and $0 otherwise, what is the expected value of the policy? (enter a minus sign if necessary and round your answer to the nearest dollar

Explanation / Answer

Chances of dying = 40 percent so expected value of dying = 0.40*100000

Chances of staying alive = 60 percent, so expected value of staying alive = = 0.60*0

The expected value of the policy = 0.40*100000+0.60*0 = 40,000

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